Breaking

Indonesia Seen Avoiding Total Ban on Ore Exports in 2014

Oct. 30 (Bloomberg) -- Indonesia may refrain from a
complete ban on mineral-ore shipments in 2014 as the country
needs the revenue to offset declining income from the oil and
gas industry, said an adviser to the industry ministry.

Earnings from ore exports may reach $10 billion in 2013 and
proceeds from mining and metals represent more than 6 percent of
the national budget, Soemantri Widagdo said at a conference in
Singapore today. Growing revenue makes a complete ban unlikely,
he said. While he advises the ministry on metals policy, he said
he wasn’t speaking on behalf of the government.

The proposed ban is part of wider efforts by Indonesia to
increase the value of commodity exports and strengthen control
over supply. China, the world’s biggest user of industrial
metals, sourced 56 percent of its nickel ore imports and 67
percent of its bauxite needs from Indonesia in the first nine
months, customs data compiled by Bloomberg show. The Indonesian
Chamber of Commerce and Industry, or Kadin, said today that it
wants a transition period of four to five years.

“In the past few years, the contribution of the oil and
gas industry to our GDP has been declining and the contribution
from non-oil and gas has been increasing,” said Widagdo. “We
don’t want to stop exports by 100 percent.”

Most revenue this year is from exports of bauxite, nickel
and copper ores, and minerals containing iron, said Widagdo. One
way to avoid a total ban is to increase tariffs, he said. The
tax on exports stands now at 20 percent.

Compromise Possible

The economic reality for Indonesia is that a full ban would
be “nothing short of disastrous,” Peter Richardson, chief
metals economist at Morgan Stanley, said at a conference in
Melbourne today. There may be a compromise to allow the
continuation of some, more heavily taxed ore exports, he said.

While the country plans to halt ore shipments, the
government is studying exemptions for mining companies that have
smelters or plan to build them. The chances that Indonesia will
ban sales are 50-50, according to Glencore Xstrata Plc.

Kadin is seeking a transition period to allow mining
companies to build smelters, Didie Suwondho, head of taskforce
for minerals downstream, told reporters in Jakarta.

Nickel, used in stainless steel, has slumped 14 percent to
$14,630 a ton on the London Metal Exchange this year as
stockpiles soared to an all-time high because of increasing
production and weak demand. Inventories in warehouses monitored
by the LME more than doubled to 236,958 tons since the start of
2012, bourse data compiled by Bloomberg shows.